Author Topic: Quick Betterment question  (Read 2114 times)

deek

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Quick Betterment question
« on: March 27, 2017, 08:23:20 AM »
I will be transferring old 401k funds to Betterment. As I understand it, a traditional IRA allows me to claim present contributions as deductions when filing taxes to avoid being taxed again on post tax contributions later in life... since Betterment only allows post-tax dollars as contributions. With a Roth IRA, only the gains would be taxed.

Edit --- the rep told me gains are taxed in a Roth with Betterment, but this confuses me because I thought earnings were not taxed?

Still having trouble figuring out which is more to my benefit. Can anyone put this answer in simple terms for me? I have done some research, but it just still hasn't clicked with me yet. It will with time. Thanks!
« Last Edit: March 27, 2017, 08:47:27 AM by dj »

Aggie1999

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Re: Quick Betterment question
« Reply #1 on: March 27, 2017, 08:58:59 AM »
Question: Why put tax advantaged money in Betterment? Betterment's and other robo-advisors claim to fame is automatic tax loss harvesting. With tax advantaged accounts you don't get TLH. So you are basically paying Betterment for no benefit. BTW, even with TLH the benefit is questionable. Those Betterment fees add up to a significant level over time.

IMO, put your money in cheap index funds in Vanguard/Fidelity/Schwab. Start out with just the total US index and total international index funds. Then if you think Betterment's strategy is better, just duplicate the funds they would buy, sticking with funds or like funds that don't have a trading fee. Since you would be doing this in an tIRA/rIRA there will be no tax consequences to selling.

deek

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Re: Quick Betterment question
« Reply #2 on: March 27, 2017, 09:08:58 AM »
Question: Why put tax advantaged money in Betterment? Betterment's and other robo-advisors claim to fame is automatic tax loss harvesting. With tax advantaged accounts you don't get TLH. So you are basically paying Betterment for no benefit. BTW, even with TLH the benefit is questionable. Those Betterment fees add up to a significant level over time.

IMO, put your money in cheap index funds in Vanguard/Fidelity/Schwab. Start out with just the total US index and total international index funds. Then if you think Betterment's strategy is better, just duplicate the funds they would buy, sticking with funds or like funds that don't have a trading fee. Since you would be doing this in an tIRA/rIRA there will be no tax consequences to selling.

I'm open to just heading over to Vanguard and opening up an IRA there. Do they give you reccomendations and how to spread out your investments based on goals?

prognastat

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Re: Quick Betterment question
« Reply #3 on: March 27, 2017, 09:10:53 AM »
Question: Why put tax advantaged money in Betterment? Betterment's and other robo-advisors claim to fame is automatic tax loss harvesting. With tax advantaged accounts you don't get TLH. So you are basically paying Betterment for no benefit. BTW, even with TLH the benefit is questionable. Those Betterment fees add up to a significant level over time.

IMO, put your money in cheap index funds in Vanguard/Fidelity/Schwab. Start out with just the total US index and total international index funds. Then if you think Betterment's strategy is better, just duplicate the funds they would buy, sticking with funds or like funds that don't have a trading fee. Since you would be doing this in an tIRA/rIRA there will be no tax consequences to selling.

I'm open to just heading over to Vanguard and opening up an IRA there. Do they give you reccomendations and how to spread out your investments based on goals?

Reading this might be a good start:
http://jlcollinsnh.com/stock-series/

caracarn

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Re: Quick Betterment question
« Reply #4 on: March 27, 2017, 09:13:37 AM »
Question: Why put tax advantaged money in Betterment? Betterment's and other robo-advisors claim to fame is automatic tax loss harvesting. With tax advantaged accounts you don't get TLH. So you are basically paying Betterment for no benefit. BTW, even with TLH the benefit is questionable. Those Betterment fees add up to a significant level over time.

IMO, put your money in cheap index funds in Vanguard/Fidelity/Schwab. Start out with just the total US index and total international index funds. Then if you think Betterment's strategy is better, just duplicate the funds they would buy, sticking with funds or like funds that don't have a trading fee. Since you would be doing this in an tIRA/rIRA there will be no tax consequences to selling.

+1 on this

I just moved my IRA FROM Betterment to Vanguard for exactly this fee savings.  With their recent fee increase (which could also signal more of them in the future) it made little sense to pay their fee on top of the fees for the funds themselves.  Of the 12 holdings in my portfolio (I was 90/10) 10 of the 12 were Vanguard funds anyway.  I was in for two years and would not say I felt that they gave me any real benefit.  They have a pretty interface and their retirement analysis tool is pretty slick but not sure it is worth the added cost.  It does not give you any special information, just presents it in a nice pretty interactive package.

Also, I am still waiting on my cost basis information to get over to Vanguard from Betterment going on 6 weeks now.  I still have two weeks before I wanted to make changes once my ETFs move to long term capital gains, but this has been very frustrating.  Certainly will make me rethink ever moving to Betterment again, as what then send, which is a Google Sheets spreadsheet is not useable for auto import so I need to wait until Vanguard can hand key my hundreds of transactions in.  I'd keep all that in mind before you decide to move to Betterment.

matchewed

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Re: Quick Betterment question
« Reply #5 on: March 27, 2017, 09:16:57 AM »
Question: Why put tax advantaged money in Betterment? Betterment's and other robo-advisors claim to fame is automatic tax loss harvesting. With tax advantaged accounts you don't get TLH. So you are basically paying Betterment for no benefit. BTW, even with TLH the benefit is questionable. Those Betterment fees add up to a significant level over time.

IMO, put your money in cheap index funds in Vanguard/Fidelity/Schwab. Start out with just the total US index and total international index funds. Then if you think Betterment's strategy is better, just duplicate the funds they would buy, sticking with funds or like funds that don't have a trading fee. Since you would be doing this in an tIRA/rIRA there will be no tax consequences to selling.

I'm open to just heading over to Vanguard and opening up an IRA there. Do they give you reccomendations and how to spread out your investments based on goals?

It is retirement fund money. The goal is fairly straightforward I think. I'd read the stock series and form an Investment Policy Statement.

deek

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Re: Quick Betterment question
« Reply #6 on: March 27, 2017, 09:37:28 AM »
Question: Why put tax advantaged money in Betterment? Betterment's and other robo-advisors claim to fame is automatic tax loss harvesting. With tax advantaged accounts you don't get TLH. So you are basically paying Betterment for no benefit. BTW, even with TLH the benefit is questionable. Those Betterment fees add up to a significant level over time.

IMO, put your money in cheap index funds in Vanguard/Fidelity/Schwab. Start out with just the total US index and total international index funds. Then if you think Betterment's strategy is better, just duplicate the funds they would buy, sticking with funds or like funds that don't have a trading fee. Since you would be doing this in an tIRA/rIRA there will be no tax consequences to selling.

I'm open to just heading over to Vanguard and opening up an IRA there. Do they give you reccomendations and how to spread out your investments based on goals?

It is retirement fund money. The goal is fairly straightforward I think. I'd read the stock series and form an Investment Policy Statement.

I meant just as far as what age I want to shoot for, that kind of thing.

Aggie1999

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Re: Quick Betterment question
« Reply #7 on: March 27, 2017, 09:43:24 AM »
Question: Why put tax advantaged money in Betterment? Betterment's and other robo-advisors claim to fame is automatic tax loss harvesting. With tax advantaged accounts you don't get TLH. So you are basically paying Betterment for no benefit. BTW, even with TLH the benefit is questionable. Those Betterment fees add up to a significant level over time.

IMO, put your money in cheap index funds in Vanguard/Fidelity/Schwab. Start out with just the total US index and total international index funds. Then if you think Betterment's strategy is better, just duplicate the funds they would buy, sticking with funds or like funds that don't have a trading fee. Since you would be doing this in an tIRA/rIRA there will be no tax consequences to selling.

I'm open to just heading over to Vanguard and opening up an IRA there. Do they give you reccomendations and how to spread out your investments based on goals?

At the start just put your money in a 3 fund portfolio: https://www.bogleheads.org/wiki/Three-fund_portfolio

Then after learning you can decide if you want something more complex. Like I said if you end up wanting to mirror the Betterment portfolio just buy the individual ETFs/funds yourself. Betterment shows you the percentages and each fund for a given goal even without money in the Betterment account. Remember to avoid any ETFs/funds that charge a trade fee. I just got into investing beyond my 401k at the start of the year. It's actually pretty easy as long as you keep it simple.

BTW, checkout the following calculator on how much the additional fees you would pay at Betterment add up over time: http://www.begintoinvest.com/expense-ratio-calculator/

neo von retorch

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Re: Quick Betterment question
« Reply #8 on: March 27, 2017, 09:54:57 AM »